Director Chopra (ousted).
Director Bessent (replaced).
Director Vought (temporary).
Director McKernan (nominated).
On Feb. 1, President Trump ousted Consumer Financial Protection Bureau Director Rohit Chopra, a Biden appointee. This surprised no one. In his place, Trump appointed Treasury Secretary Scott Bessent as acting director who immediately put a hold on much of the Bureau's work unless expressly approved or required by law. Shortly after that, Trump replaced Bessent at the CFPB with Russ Vought after the Senate confirmed him as director of the Office of Management and Budget (OMB). Vought expanded upon Bessent’s efforts and halted all supervision and enforcement-related activity, ceased stakeholder engagement and public communications (including dismantling social media accounts), and declined to request any additional funding for the Bureau. Essentially, the CFPB is dormant.
Two weeks. Three directors.
With a fourth on the horizon.
Although OMB Director Vought remains the Acting CFPB Director, President Trump has nominated Jonathan McKernan to the post. McKernan is a former board member of the Federal Deposit Insurance Corporation and Senate staffer who is expected to, if confirmed, bring more stability to the Bureau, but likely also a more limited mission.
Why does this matter: The CFPB’s purview—depending on the administration—can be quite expansive, and does affect the innovation ecosystem. The most obvious example of this came earlier in former Director Chopra’s term when he leveraged long-dormant authority to expand the CFPB supervisory authority to non-bank entities—including financial technology companies—whose activities the CFPB has reasonable cause to believe pose risks to consumers.
To be clear, it is unlikely this administration will take such an expansive view; in fact, we expect the opposite. But there are still CFPB-driven issues that touch the innovation ecosystem:
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Open banking rule (Section 1033): CFPB rule that requires lending institutions to share certain data on consumer transactions and accounts with consumers and authorized third parties. This enables open banking, lowers switching costs, and helps create secure APIs. It is also being challenged by banks, setting up a clash with the fintech industry.
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Payment rules: CFPB rule that establishes their supervisory authority and additional requirements for payment processors—including digital wallets and apps—that transact a certain number of payments per year. The key here is which companies would be considered a “larger participant” and covered.
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Bank partnerships: The CFPB—along with other banking regulators—may reconsider how bank partnerships are treated and the expectations and requirements around them. That will shape not only many of the fintechs that partner with banks to provide services, but also those in the innovation ecosystem using products and services from those fintechs.
So although CFPB may not be top of mind for every innovator, how it operates will matter.
A few things to consider:
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Baby and bathwater: The innovation ecosystem didn’t support all CFPB actions, but it supported some, such as data sharing under 1033. Pressure from traditional financial institutions to overturn that may meet a more favorable audience in the new regime.
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Volatility: The CFPB took years to stand up. And although its posture would shift depending on administration, this initial stop-work order and revamp is aggressive. There is opportunity in chaos, but the severe machinations and shifts at the top can make it difficult for industry—and innovators—to understand the rules of the road and how to navigate them.
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Power (er, states) abhor a vacuum: As the CFPB likely recedes to a more limited remit, expect the state agencies and legal branches to get more aggressive, particularly in Democratic-led states like New York and California. The CFPB worked to collaborate with the states on enforcement actions in the past. But especially post-election, Chopra worked to educate, inform, and empower state agencies to take up a more aggressive posture. States have their own consumer protection laws they can enforce independent of federal agencies. California created a “mini CFPB” that has authority to oversee financial products and services offered in the state, including nonbank entities licensed in other jurisdictions.
Net/net: The CFPB is in incredible flux right now, and when it finds its footing, it will take a more limited approach. But that does not necessarily mean deregulation—it means regulation from other parties, in particular the states.
Carta Policy on the Hill: VC 101
This week, Carta's Policy Team briefed congressional staff on how venture capital operates, the regulatory landscape, and the importance of the VC ecosystem to innovation, competition, and economic growth.
Quick hits
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Crypto corner: Brian Quintenz, former CFTC Commissioner and head of policy at a16z crypto, has been nominated to lead the CFTC—an agency that will play a key role in developing a regulatory framework for crypto; SEC paused crypto litigation case against Binance citing crypto task force work—expect similar actions in other outstanding non-fraud cases.
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Tax reform: The House and Senate both advanced budget resolutions, which is key for unlocking the ability to pass tax with a simple (Republican-only) majority. The issue: the budgets must be identical and they were not. What does this mean for tax reform? The pressure to pay for tax cuts is increasing, which means there may be additional pressure on carried interest and QSBS.
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SEC fast-tracking Gensler-era rollback. Acting Chairman Mark Uyeda nixed some of the agency’s most controversial rules and practices adopted under former Chair Gary Gensler. The SEC requested to pause climate-risk disclosure litigation, rolled back proxy and crypto accounting guidance, and removed investor information from the trading surveillance database, among other items. These actions help clear the deck for Paul Atkins, Trump’s nominee to lead the SEC, to begin implementing his own agenda priorities after he is confirmed.
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House unanimously passes Corporate Transparency Act (CTA) delay. By a 408-0 vote, the House passed legislation to delay beneficial ownership reporting for one year, underscoring the pressure policymakers are feeling to provide certainty for small businesses as legal challenges make their way through the courts. The Senate has yet to act, so there’s been no change in law. FinCEN has halted required compliance per court order but continues to defend the CTA’s constitutionality, implying they expect to implement it in the future.
Tax reform watch
House and Senate both advanced budget resolutions this week. Passing a budget resolution will be key to unlocking President Trump’s legislative agenda, but it must be identical. Currently, the House and Senate are pushing forward down very different paths.
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Senate: Pursuing two-part strategy. Advanced narrow package to cover energy/border, punting tax to later in year.
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House: Provides $4.5 trillion in tax cuts. The number is below the projected $4.7T cost to make TCJA cuts permanent, in addition to Trump’s tax priorities like ending taxes on tips, which will cost even more. Moreover, the House budget calls for $2T, which could mean steep cuts on social welfare and health care programs that will not play well in battleground districts.
What this means for tax reform: Scaled back tax package could put additional pressure on ending QSBS and carried interest to find additional revenue.
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—Anthony Cimino and Holli Heiles Pandol
